Plastic takes charge over cash

The 45-year-old Elkridge mother of two teenage sons rarely carries money in her purse anymore - cash is too easy to lose, get stolen and last, but not least, spend.

"Cash has legs," Simmons says. "It just wants to go everywhere but in your pocket. I just don't like to have it on me."

In fact, Simmons, who also forgoes writing checks by paying her bills online, could go entirely paperless if not for those few remaining souls who don't take plastic: "There are times when you do need cash - like when my boys ask me for $5."

Thanks to consumers like Simmons, plastic recently outpaced paper as the preferred mode of payment at the nation's checkout lines for the first time ever, and experts say it will soon be commonplace to pay for nearly everything from Big Macs to mortgages with a card rather than cash or checks.

Paper steadily has been losing out to the various forms of plastic - credit, debit or prepaid cards - and last year, the balance tipped: Cards were used for 53 percent of store purchases, while cash or checks were handed over for 47 percent of them, according to the most recent Study of Consumer Payment Preferences.

It used to be that consumers had only three payment options: cash, check or credit card. But these days, companies are heavily promoting the use of the newer debit and prepaid cards, which look like credit cards but act like cash in that users don't incur debt or interest charges.

Television ads have long featured comedian Jerry Seinfeld demonstrating the benefits of using his American Express at gas stations and supermarkets, but lately he's been joined by George Steinbrenner, allegedly preserving his sore check-writing hand by instead using a Visa check card to pay the stadium utility bill and players' salaries.

Card companies are aggressively soliciting industries that have traditionally accepted only cash or checks - such as parking garages, insurance companies and fast food restaurants - to start taking their cards.

Different uses

As a result, consumers, who once reserved their cards for big ticket items like kitchen appliances and summer vacation trips, now use them for things big, small and in-between.

Planning to see the new martial arts epic Hero? Go online and purchase advance tickets with your bank card. Time to pay your monthly rent? Forget the mail and bill it to your credit card. Need a quick fix of caffeine? Just whip out your prepaid Starbucks card.

Simmons uses her Visa debit card to pay for gas at the Exxon station and the occasional lunch at Panera Bread. Just recently, she used the card at Giant to buy seafood and salad fixings for dinner and at McDonald's to buy her sons a quick meal.

"It's so much easier," she says.

Card companies love people like Simmons. They're hoping she and others like her will lead the way toward a cashless society someday. While that's still far in the future, the average American household owns from 7 to 13 payment cards, including credit, debit and store cards.

By 2007, the majority of payments - not just for in-store goods and services, but also bills like mortgages, medical fees and car payments - will be made with a card rather than cash or checks, speculates The Nilson Report, the leading publication covering consumer payments systems worldwide.

Consumers increasingly are comfortable using cards, and the companies that issue them have been working with businesses and government agencies to create new ways of transferring money via plastic rather than paper.

Use at schools

For example, students at the University of San Diego and Northwestern University who used to hit up their parents for a check can now use their student identification badges to tap into an account set up to pay for books, snacks and other incidentals. Tax filers, instead of waiting for a check, can receive their refunds on prepaid cards.

Businesses like U-Haul and Stanley Steemer have converted employee paychecks into electronic cards that can be re-loaded each pay date. Government agencies similarly have transferred child support and unemployment payments to cards. Maryland began using reloadable electronic cards for child support payments about two years ago.

The cards help save businesses and government hundreds of thousands of dollars in postage and check costs.

Each year, 4 million paychecks are damaged, lost or stolen each year and reissuing them costs U.S. businesses $48 million, according to the American Payroll Association.

Avoiding those costs has lured many companies and states toward using electronic payment cards.

"Electronic delivery is much more reliable," says Craig R. Goellner, director of Colorado's child support enforcement agency, which began offering electronic cards to clients three years ago. "There's a lot of overhead costs associated with checks. With cards, we no longer have to worry about lost, stolen, counterfeit, returned, undeliverable or fraudulent checks."